FTC sues insulin middlemen for pocketing billions while patients face high costs

Millions of diabetics need insulin to survive. For years, many of them have had to pay horrendous prices for a product that is cheap to produce. Now the federal government is targeting a part of the system that is behind the high insulin prices.

While the deductible has dropped to $35 a month for many people, questions remain about how the drug got so expensive in the first place. In a new lawsuit filed Friday, the Federal Trade Commission said it is targeting one link in the chain: pharmacy benefit managers (PBMs).

The FTC has filed suit against the leading PBMs — CVS Health's Caremark Rx, Cigna's Express Scripts and United Health Group's OptumRx — alleging the companies have created a “perverse drug rebate system” that artificially inflates the cost of insulin. If successful, the suit could further reduce costs for patients at the pharmacy counter.

PBMs are essentially the middlemen between drug manufacturers and insurers. Their job is to lower drug prices. But the process is complex and opaque, and critics say they actually drive up prices for patients.

According to the FTC, a major problem is that PBMs' revenue is tied to rebates and fees based on a percentage of a drug's list price. Essentially, in the case of insulin, higher rebates and fees resulted in higher rebates and fees for the PBMs when the drug cost more.

“Even when insulins became available at lower list prices that would have been more affordable for vulnerable patients, PBMs systematically excluded them in favor of insulin products with high list prices and deep discounts,” the FTC said in a press release Friday.

The three PBMs named in the FTC complaint account for about 80% of the market. According to the complaint, the PBMs collected billions of dollars in rebates and fees while insulin became increasingly unaffordable.

Over the past two decades, the cost of the life-saving drug has risen 600% – forcing many Americans with diabetes to ration their medications and risk their health. In 2019, one in four insulin patients couldn't afford their medication, according to the FTC. Some people have died.

The Pharmaceutical Care Management Association, which represents PBMs, disputed many of the allegations in the FTC's lawsuit, including that PBM rebates correlate with higher list prices. “Not only does this action fail to accurately account for the role of the entire prescription drug supply chain, it also ignores the positive progress supported by PBMs to make insulin more affordable for patients,” the PCMA said in a statement.

Over the years, about 20 states have passed laws or programs to limit the cost patients pay for insulin, but some of the biggest changes have occurred in the last two years.

In 2022, Congress passed the Inflation Reduction Act, which capped out-of-pocket insulin costs for Medicare patients. Last year, Eli Lilly, Novo Nordisk and Sanofi — the three companies that control about 90% of the U.S. insulin supply — also promised to cut some of their prices.

On Friday, Rahul Rao, deputy director of the FTC's Bureau of Competition, said the investigation into the PBMs revealed the three manufacturers' “troubling and active role” in creating insulin that has become unaffordable for many diabetics. Rao said the three companies continued to raise the list price of their insulin products “in response to the PBMs' demands for deeper discounts.”

Copyright: NPR